Better Defense Stock to Own Through 2030: Palantir vs. RTX Corporation

With defense spending rising worldwide, Palantir Technologies (NASDAQ: PLTR) and RTX Corporation (NYSE: RTX) offer two distinct ways to invest in the trend.

But which one deserves a spot in a portfolio through 2030: the fast-growing artificial intelligence (AI) software company or the established defense giant?

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The software solution for modern warfare

Palantir's software helps defense and intelligence agencies gather information from diverse sources, coordinate operations, and inform battlefield decisions. With militaries becoming more reliant on drones, satellite imagery, and real-time intelligence, Palantir is building the software that makes it all possible.

AI is also making its role even more important. The company's Artificial Intelligence Platform (AIP) helps organizations deploy AI using their own data and operational systems. And the results are showing up in the numbers.

In the second quarter, revenue climbed 93% year over year, with U.S. commercial revenue surging 149% and U.S. government revenue jumping 90%. The company also reported strong profitability and raised its full-year guidance. Looking ahead, if AI adoption accelerates, Palantir has more room to expand across both government and commercial markets.

But the catch is valuation: Palantir trades at a trailing price-to-earnings (P/E) ratio of 168. At that multiple, investors are paying a premium for software-driven growth.

On top of that, there are business risks. Palantir must compete with established technology providers, while government programs can be cut or canceled as budgets and priorities change.

Still, analyst opinion on the stock is bullish, with 30 analysts rating it a moderate buy. Their target prices during the next year, however, are between $80 and $265.

Meanwhile, another company offers a more traditional route into defense, with established products and a much broader business.

The defense giant with multiple ways to grow

Through Raytheon, Pratt & Whitney, and Collins Aerospace, RTX supplies everything from missile defense systems and military engines to aircraft components.

That breadth is a major advantage. Raytheon benefits from military demand for advanced air defense, precision weapons, and naval capabilities. Meanwhile, Pratt & Whitney and Collins Aerospace serve the global aviation industry.

RTX's defense business is already benefiting from governments' efforts to strengthen their military capabilities and replenish weapons inventories. For example, its Patriot air defense systems and Tomahawk missile programs give it exposure to some of the most important areas of national security.

Its latest results only strengthen the bull case. RTX's third-quarter report showed an 11% increase in sales, while it raised its full-year earnings and revenue outlook. The company also reported a record $340 billion backlog, which includes $164 billion in defense orders.

Its valuation, however, is less demanding at a P/E of only 31 supported by an established defense franchise with a huge contract backlog.

Still, the company is vulnerable to manufacturing and supply chain challenges, as well as to defense programs encountering delays and cost overruns. That said, analyst opinion is still positive. In fact, an average among 26 analysts rates the stock a moderate buy, with target prices implying as much as 35% upside.

Both Palantir and RTX stand to benefit from military spending, but which one comes out ahead?

Which stock is better to hold through 2030?

Between the two companies, Palantir is the higher-upside, higher-valuation option for growth-oriented investors, especially if its AI software is more broadly adopted across defense and commercial markets.

On the other hand, RTX appears to be the more balanced choice, particularly when considering valuation. It offers a combination of established earnings, diversification, and a dividend, making it a strong pick for investors who want defense exposure through 2030.

Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and RTX. The Motley Fool has a disclosure policy.